Foreign Currency Loan Repayments Made Easy

The Reserve Bank of India (RBI) has revised procedures relating to repayment of foreign currency loans and credit by corporates.It will now grant general permission for repayment of the loan at the time of granting permission to draw the loan.

This move is seen as a step towards allocating more powers to banks in areas where banks have the requisite competency.

Under the earlier system, each time a repayment towards interest or principal had to be made, the corporate had to approach the RBI. It would grant permission where it was satisfied that the loan amount had been fully utilised and the required documentary evidence had been submitted by the corporate. Now, it will grant a general permission at the time of the loan drawal. Hence, each time a payment has to be made, the corporate arranges for the payment with his banker without approaching RBI.

The bank will make the remittance subject to compliance with the conditions stipulated in the letter of approval issued by the government or the RBI and after ensuring that the borrower has submitted the required statement. Bankshave been asked to ensure that applications for remittances towards penal interest in cases of defaults should be referred to the RBI.

RBI has clarified that borrowers of foreign currency loan or credit are not permitted to use balances in their foreign currency accounts maintained in India or abroad unless approval for specific application for repayment or payment is obtained from the RBI.

Borrowers who want to make repayment through a bank other than the bank through which the borrowing was made, in order to take advantage of finer rates, will be not have to approach the RBI.

Such arrangements can be made among the banks themselves. The designated bank should not allow any subsequent remittance by itself or via another bank, if a proper certificate from the remitting bank has not been received for previous remittance.